Last Updated: December 18, 2013

Overview

The state of Texas is second only to Alaska in land area among the states. It leads the nation in total energy production, primarily from crude oil and natural gas. The state is also rapidly developing its non-hydroelectric renewable energy resources, particularly wind. Onshore air movement off the Gulf of Mexico sweeps across the state, bringing warm moist air from the coast up over the high plains and to the western mountains, losing moisture as it goes. The result is a varied climate ranging from humid subtropical at the coast to semi-arid on the high plains to arid in the mountains. Because of its size and varied climate, energy use for heating and especially cooling is high.

Among the states, Texas has the second largest population and the second largest economy, after California. However, it leads the nation in energy consumption, accounting for more than one-tenth of the U.S. total. The industrial sector accounts for the largest share of energy use in Texas. The state has many energy-intensive industries, including petroleum refining and chemical manufacturing. The transportation sector accounts for the second largest share of energy consumption, in part because of the distances traveled across such a big state and because of the large number of registered motor vehicles.

Petroleum

Texas leads the nation in crude oil reserves and production. It has almost one-fourth of the U.S. total crude oil reserves. Although the reserves are found in several geologic basins throughout the state, the largest remaining fields are in the Permian Basin of West Texas, where more than 20 of the nation's top 100 oil fields are located. Texas is also the leading crude oil-producing state in the nation, exceeding even the federal offshore areas. The state's signature type of crude oil, known as West Texas Intermediate (WTI), is traded in the domestic spot and futures markets at Cushing, Oklahoma. WTI is a high-quality, low-gravity, "sweet" low-sulfur crude oil and yields a large fraction of motor gasoline when refined. It is produced in Texas and southern Oklahoma and serves as a benchmark for oil pricing in North America.

The first major oil boom in Texas began in 1901 with the discovery of the Spindletop oil field. Later discoveries increased Texas crude oil production until 1972, when production peaked at more than 3.4 million barrels per day. In subsequent years, output fell to less than one-third of the 1972 peak. However, production began to increase in 2010 because of advances in production technology and by mid-2012 was up to 1.9 million barrels per day.

With 27 petroleum refineries that can process more than 4.7 million barrels of crude oil per day, Texas leads the nation in crude oil refining capacity. More than one-fourth of nation's total refining capacity is located in Texas. The majority of Texas' refineries are clustered near major ports along the Gulf Coast, including the Houston area, Port Arthur, and Corpus Christi. Refineries in the Houston area, including the nation's largest refinery in Baytown, make up the largest refining center in the United States. These coastal refineries have access to local Texas production, foreign imports, and crude oil produced offshore in the Gulf of Mexico. Many of the Texas refineries are sophisticated facilities that use additional refining processes beyond simple distillation to yield a larger quantity of lighter, higher-value products, such as motor gasoline. Because of this downstream capability, Texas refineries often process a wide variety of crude oil types from around the world, including heavier, lower-value varieties. Refined-product pipelines spread out from Houston across the country, allowing Texas petroleum products to reach virtually every major consumption market east of the Rocky Mountains. Two of the U.S. Strategic Petroleum Reserve's largest storage facilities are in Texas at Bryan Mound and Big Hill.

Texas leads the nation in total petroleum consumption, and it is first among the states in the consumption of distillate fuel oil and liquefied petroleum gases (LPG). Texas LPG use, at almost six-tenths of the nation's total, is greater than the LPG consumption of all other states combined. The vast majority of LPG is consumed by the industrial sector where it is used as a chemical feedstock in petrochemical plants.

While much of the state is able to sell and use conventional motor gasoline the eastern half of the state and El Paso County at the extreme western tip of the state require several different motor gasoline blends to meet their diverse air quality requirements. These blends include reformulated motor gasoline blended with ethanol, which is required in the metropolitan areas of Greater Houston and Dallas-Fort Worth.

Natural gas

Texas leads the nation in natural gas production. Approximately one-third of the 100 top producing gas fields in the nation are located, in whole or in part, in Texas. While the largest U.S. gas field is in the Fort Worth Basin, the majority of the large Texas gas fields are located in the northeastern part of the state, in the East Texas basin. Like crude oil production, Texas natural gas marketed production reached its peak in 1972. From that peak of about 8.6 trillion cubic feet per year, production declined to about 6 trillion cubic feet before flattening out in the mid-1980s. After natural gas marketed production levels dropped to a low of about 5 trillion cubic feet in 2004, production increased and by 2012 it was about 7.2 trillion cubic feet, more than four-fifths of the 1972 peak production level. Much of the increase in production is the result of drilling in the Barnett Shale. Advances in horizontal drilling and well fracturing technology, first used in the Barnett play in the 1980s, coupled with increased gas prices in the late 1990s, led to significant Barnett drilling activity. As of mid-2012 there were more than 16,000 Barnett gas wells in Texas. The Eagle Ford Shale play, first developed in 2008, is also producing substantial amounts of natural gas and liquids from over 20 fields in 23 counties stretching across South Texas.

Almost one-third of the nation's proved natural gas reserves are located in Texas. The search for new markets for natural gas, and the subsequent development of new pipelines to move natural gas to market in the mid-20th century, has resulted in today's expansive network of interstate natural gas pipelines that extends from Texas to consuming markets across the nation and to Mexico.

Natural gas passes through Texas, via pipeline, on its way to and from other states. The state's largest net receipts are from New Mexico and the federal offshore. There are more natural gas market hubs in Texas than in any other state. Because the natural gas infrastructure in Texas is well connected to consuming markets throughout the country, two liquefied natural gas (LNG) import terminals were built along the state's Gulf Coast. The state's first LNG terminal at Freeport, Texas became operational in April 2008. Another LNG terminal at Sabine Pass, Texas, began service in March 2011. Owners of both terminals are developing additions to allow LNG exports as well.

Natural gas storage capacity in Texas is among the highest in the nation. A majority of the state's 36 active storage facilities are in depleted oil and gas fields converted for storage use, and the rest were developed in salt caverns. These facilities allow Texas to store its natural gas production when demand is typically low and to ramp up delivery quickly when markets across the country require greater volumes of natural gas.

Texas leads the nation in natural gas use and is responsible for nearly one-seventh of the nation's total consumption. The industrial and electric power sectors dominate natural gas demand and together account for more than four-fifths of state use. The Texas industrial sector accounts for one-fifth of the U. S. total industrial sector consumption, while the amount of natural gas used for electricity generation in Texas is greater than in any other state and is about one-fifth of the national total used for that purpose.

Coal

Texas is the largest lignite producer and the fifth-largest coal producer in the nation. It currently only produces lignite, the lowest grade of coal. Substantial lignite coal reserves are found in narrow bands in the Texas Gulf Coast region, while bituminous coal reserves are found in north central and southwestern Texas. The state has potential coal reserves of 23 billion tons of lignite and 787 million tons of bituminous coal. The lignite mined in Texas is almost exclusively consumed within the state.

Texas is also the largest coal-consuming state and its emissions of carbon dioxide and sulfur dioxide are among the highest in the nation. Most of the coal consumed in the state is used to generate electric power. On a tonnage basis, locally mined lignite typically accounts for about two-fifths of the state's coal consumption, with most of the rest of the state's needs met by subbituminous coal brought in from Wyoming by rail.

Electricity

Texas produces more electricity than any other state, generating almost twice as much as the next largest generating state. Two-thirds of the electricity generated is from independent power producers. Almost one-half of the electricity generated in Texas comes from natural gas-fired power plants, while coal-fired power plants account for about one-third of the net electricity generation. Six of the state's 10 largest power plants are coal-fired. Two nuclear plants, Comanche Peak and South Texas Project, supply about one-tenth of the state's electric power generation. The rest of Texas' electricity generation is powered by renewable resources, primarily wind.

Texas is also the largest electricity consuming state. Unlike other regions where large net interstate electricity deliveries are available, the Texas power grid is largely isolated from the interconnected power systems serving the eastern and western United States. This isolation means the state is, for the most part, dependent on its own resources to meet its electricity needs, and it is not subject to federal rules. Among the nation's contiguous 48 states, Texas is the only state that has a stand-alone electric grid entirely within the state.

The largest portion of the retail electricity sales in Texas is to the residential sector. One-half of the households in the state use electricity as their primary heating fuel. The residential use of electricity is higher in Texas than in other states, in part because of population size, but also because of high demand for air conditioning during the hot summer months and the widespread use of electricity as the primary energy source for home heating during the generally mild winter months.

Renewable energy

In 1999, the Public Utility Commission of Texas first adopted rules for the state's Renewable Energy Mandate. In 2005 the state legislature changed the mandate, requiring that 5,880 megawatts, or about 5% of the state's electricity demand, come from renewable generation by 2015, and 10,000 megawatts by 2025, including a goal of 500 megawatts of renewable-energy capacity from non-wind resources. Renewable energy sources contribute less than one-tenth of the net generation in Texas. However, with close to one-sixth of the U.S. total, the state leads the nation in electricity generation from non-hydroelectric renewable resources.

Wind accounts for nearly all of the current renewable-energy electricity generation in Texas. Texas leads the nation in wind-powered generation and is the first state to reach 10,000 megawatts of wind energy installations. Texas became the country's largest wind energy producer in 2006 when it surpassed California. In 2007, it became the first state to install one gigawatt of wind capacity in a single year. Substantial new wind generation capacity is under construction. Texas has 7 of the 10 largest wind farms in the nation, including 4 of the top 5.

Texas is rich in other renewable energy resources, including solar and biomass. High levels of direct solar radiation in West Texas can support large-scale solar power plants. As a result, the state's solar power potential is among the highest in the nation. The state's large agricultural and forestry sectors provide Texas with abundant biomass resources. Texas is expanding its use of biomass in the production of electricity and biofuels. Currently, only a very small amount of electricity is generated using biomass. The agriculturally rich Texas Panhandle, in the north, has several ethanol plants.

Hydroelectric power contributes very little electricity generation in Texas, because the relatively gentle terrain and low rainfall throughout much of the state are not conducive to its development. It can be used to supplement the electrical grid if reservoirs, primarily used for water storage, release water through a power plant during times of peak demand. However, in semi-arid Texas, water is sufficiently scarce that it is not usually released from reservoirs solely to generate electricity.

Texas has a unique untapped geothermal resource: its large network of oil and gas wells. Existing oil and gas wells connect to deeper geothermal resources, many with water as hot as 200°C. Along with crude oil and natural gas more than 12 billion barrels of water are produced annually from the state's oil and gas wells, and heat from this water could be used to generate electricity.